Apparently, videos of people fighting over towels, videogames and who can be the first into Urban Outfitters of all places are not an overall indicator, with a negative report out of Best Buy this morning and retail sales up only 0.2% over the prior month, whereas most indicators had it at 0.5% up. Earnings for Best Buy came in at 42 cents per share versus 54 cents a share a year earlier. EPS and revenue both missed estimates. Story. While Best Buy continues to fight against the view that they've become a brick and mortar showroom for online retailers, the company's continued attempts to compete with deeper discounts have only lead to lower margins and not much in the way of visible progress, as the stock is down another 10% today. Overall, while the media hyped up the bestest Black Friday in years, the end result - so far - doesn't seem to nearly live up to the hype.
Tuesday, December 13, 2011
Wednesday, November 30, 2011
Shall We Play a Game?
Edited to add: oil now over 101, gold over 1750.
Update 2: Forbes says big European bank nearly failed last night and was a likely reason behind actions taken today. Link
How about, "kick the can?" What is the primary goal? Well...
Fed statement: http://blogs.wsj.com/economics/2011/11/30/fed-statement-on-coordinated-central-bank-action-on-currency-swaps/
FAQ From the Fed: FAQ.
"The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.
These central banks have agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points so that the new rate will be the U.S. dollar overnight index swap (OIS) rate plus 50 basis points. This pricing will be applied to all operations conducted from December 5, 2011. The authorization of these swap arrangements has been extended to February 1, 2013. In addition, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank will continue to offer three-month tenders until further notice.
As a contingency measure, these central banks have also agreed to establish temporary bilateral liquidity swap arrangements so that liquidity can be provided in each jurisdiction in any of their currencies should market conditions so warrant. At present, there is no need to offer liquidity in non-domestic currencies other than the U.S. dollar, but the central banks judge it prudent to make the necessary arrangements so that liquidity support operations could be put into place quickly should the need arise. These swap lines are authorized through February 1, 2013."
Read: Europe is probably worse than indicated and worse than anyone with more detailed knowledge would care to admit and, if things get worse ("if market conditions warrant"), then the program can go further and involve currencies beyond the dollar. Additionally...through 2013?
Recommended related reading: the terrific new book from Jim Rickards on geopolitics and global financial issues, "Currency Wars":
US futures, of course, are skyrocketing on the news. To offer a "Seinfeld" reference, it would appear that anything and everything is on the table to continue "Serenity now", but...like the episode, it's just masking (papering over) the real issues...
Update 2: Forbes says big European bank nearly failed last night and was a likely reason behind actions taken today. Link
How about, "kick the can?" What is the primary goal? Well...
Fed statement: http://blogs.wsj.com/economics/2011/11/30/fed-statement-on-coordinated-central-bank-action-on-currency-swaps/
FAQ From the Fed: FAQ.
"The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.
These central banks have agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points so that the new rate will be the U.S. dollar overnight index swap (OIS) rate plus 50 basis points. This pricing will be applied to all operations conducted from December 5, 2011. The authorization of these swap arrangements has been extended to February 1, 2013. In addition, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank will continue to offer three-month tenders until further notice.
As a contingency measure, these central banks have also agreed to establish temporary bilateral liquidity swap arrangements so that liquidity can be provided in each jurisdiction in any of their currencies should market conditions so warrant. At present, there is no need to offer liquidity in non-domestic currencies other than the U.S. dollar, but the central banks judge it prudent to make the necessary arrangements so that liquidity support operations could be put into place quickly should the need arise. These swap lines are authorized through February 1, 2013."
Read: Europe is probably worse than indicated and worse than anyone with more detailed knowledge would care to admit and, if things get worse ("if market conditions warrant"), then the program can go further and involve currencies beyond the dollar. Additionally...through 2013?
Recommended related reading: the terrific new book from Jim Rickards on geopolitics and global financial issues, "Currency Wars":
US futures, of course, are skyrocketing on the news. To offer a "Seinfeld" reference, it would appear that anything and everything is on the table to continue "Serenity now", but...like the episode, it's just masking (papering over) the real issues...
Monday, November 28, 2011
Black Friday Video
Can't people be civil?
Swarming over towels. I've seen mosh pits at rock concerts that are more courteous. I can only hope the dollar doesn't ever collapse, as if this is mere shopping, one can only imagine what that would look like.
More pushing/shoving. Fighting for a video game that, if like many video games, they will likely get tired of within the month and then see a few months later for half the Black Friday price used at Gamestop.
Urban Outfitters? Really? Is overpriced casual wear really worth rushing the store at midnight like a zombie movie?
No comment.
Swarming over towels. I've seen mosh pits at rock concerts that are more courteous. I can only hope the dollar doesn't ever collapse, as if this is mere shopping, one can only imagine what that would look like.
More pushing/shoving. Fighting for a video game that, if like many video games, they will likely get tired of within the month and then see a few months later for half the Black Friday price used at Gamestop.
Urban Outfitters? Really? Is overpriced casual wear really worth rushing the store at midnight like a zombie movie?
No comment.
Tuesday, November 22, 2011
The US Can't Get Its House In Order, But...
The Supercommittee failed at crafting spending cuts and the US remains incapable of coming to terms on addressing the country's financial/structural issues, but yet - here comes the IMF ready to come to the aid of Europe.
"The new liquidity line would give countries with relatively good economic policies access to credit for six months, the I.M.F. said. It could also be used under a 12- to 24-month arrangement with access up to 1,000 percent of a members’ quota"
Hmmm...who decides what are "good economic policies"?
"The reform enhances the Fund's ability to provide financing for crisis prevention and resolution," IMF Managing Director Christine Lagarde said in an e-mailed statement. "This is another step toward creating an effective global financial safety net to deal with increased global interconnectedness."
So, the global financial system has become too interconnected to fail?
Story
Let's all take a trip to the money factory, shall we?
"The new liquidity line would give countries with relatively good economic policies access to credit for six months, the I.M.F. said. It could also be used under a 12- to 24-month arrangement with access up to 1,000 percent of a members’ quota"
Hmmm...who decides what are "good economic policies"?
"The reform enhances the Fund's ability to provide financing for crisis prevention and resolution," IMF Managing Director Christine Lagarde said in an e-mailed statement. "This is another step toward creating an effective global financial safety net to deal with increased global interconnectedness."
So, the global financial system has become too interconnected to fail?
Story
Let's all take a trip to the money factory, shall we?
Morning News
US Q3 GDP revised to 2% from 2.5%. Expectations were for unchanged. It comes as no surprise to the author.
US targets Iran oil industry/central bank.Story
Netflix drops after attempting to raise capital, raising concerns about liquidity after the company's shares have dropped significantly in recent months, from a high just over 300 to under 70 as of pre-market this morning. Story
MF Global Trustee says that 1.2B or more may be missing. Story
Non-UK investors own most of City of London for the first time. Story
Rupee plunges; RBI tries to stem currency drop. Story
Focus Media denies allegations: Story
JA Solar Q3 loss 36c a share
Campbell Soup Q1 net flat at 82c
US targets Iran oil industry/central bank.Story
Netflix drops after attempting to raise capital, raising concerns about liquidity after the company's shares have dropped significantly in recent months, from a high just over 300 to under 70 as of pre-market this morning. Story
MF Global Trustee says that 1.2B or more may be missing. Story
Non-UK investors own most of City of London for the first time. Story
Rupee plunges; RBI tries to stem currency drop. Story
Focus Media denies allegations: Story
JA Solar Q3 loss 36c a share
Campbell Soup Q1 net flat at 82c
There's No Team in Supercommittee
There's no I in team, and there's apparently no teamwork in government. As has been reported, the group of senators announced, "...after months of hard work and intense deliberations, we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee's deadline."
It's astonishing to me that a government committee, basically chosen for the task of crafting spending cuts, could not come to a decision. This, after congress displayed an inability to do so this Summer regarding the debt ceiling debate (and the fallout that came after.) At the same time, it's astonishing that the failure to come to an agreement is not entirely surprising, either. Much has been discussed in financial media, with some news anchors talking about how the failure to come to an agreement is "no surprise" - but isn't that in itself a sad statement? Those elected to lead have lowered expectations to the point where their inability to come to an agreement on important financial issues is almost expected.
Has politics become so lucrative that playing political games become in the greater interest of politicians than making difficult decisions or even basic decisions in the interest of the American populace? Or is this not even a matter of political games as much as it is the inability of both parties to face the very un-super reality of the country's finances? Or both? These are questions the entire country has to answer because the inability of this government to even get budgetary issues done is immensely concerning and speaks volumes about so many other aspects of what we rely upon - if this congress can't work together on budgetary issues, may I ask what they can work together on? There's not a lot of time, either - the time to start making progress on some of the structural issues of this country has passed and we need politicians with the courage to lead and face economic realities that may not be pleasant or popular, because continuing to go down the same path will only snowball current problems. Additionally, we haven't even seen the fallout from this committee's inability to come to a decision - both on the surface (possible debt rating/outlook downgrades) and below the surface (how the inability to come to a decision will be seen in other parts of the world.)
The approval rating of Congress last month? 9%? Does that concern any of them? Maybe it should, especially given that even Paris Hilton and the IRS have higher approval ratings (15% and 40%, respectively.) When your approval rating is significantly lower than the IRS and a faded reality star who no one was sure why they were popular in the first place, that may signal a problem. Story
It's astonishing to me that a government committee, basically chosen for the task of crafting spending cuts, could not come to a decision. This, after congress displayed an inability to do so this Summer regarding the debt ceiling debate (and the fallout that came after.) At the same time, it's astonishing that the failure to come to an agreement is not entirely surprising, either. Much has been discussed in financial media, with some news anchors talking about how the failure to come to an agreement is "no surprise" - but isn't that in itself a sad statement? Those elected to lead have lowered expectations to the point where their inability to come to an agreement on important financial issues is almost expected.
Has politics become so lucrative that playing political games become in the greater interest of politicians than making difficult decisions or even basic decisions in the interest of the American populace? Or is this not even a matter of political games as much as it is the inability of both parties to face the very un-super reality of the country's finances? Or both? These are questions the entire country has to answer because the inability of this government to even get budgetary issues done is immensely concerning and speaks volumes about so many other aspects of what we rely upon - if this congress can't work together on budgetary issues, may I ask what they can work together on? There's not a lot of time, either - the time to start making progress on some of the structural issues of this country has passed and we need politicians with the courage to lead and face economic realities that may not be pleasant or popular, because continuing to go down the same path will only snowball current problems. Additionally, we haven't even seen the fallout from this committee's inability to come to a decision - both on the surface (possible debt rating/outlook downgrades) and below the surface (how the inability to come to a decision will be seen in other parts of the world.)
The approval rating of Congress last month? 9%? Does that concern any of them? Maybe it should, especially given that even Paris Hilton and the IRS have higher approval ratings (15% and 40%, respectively.) When your approval rating is significantly lower than the IRS and a faded reality star who no one was sure why they were popular in the first place, that may signal a problem. Story
Swire Pacific
One of a handful of long-running Asian conglomerates, Swire Pacific dates back to the late 1700's, when it was started as a small import-export company. The company was featured under the pseudonym "Rothwell-Gornt" in James Clavell's novel "Noble House", which was a thinly-disguised portrayal of the group's competition with Jardine Matheson, a similar conglomerate with a focus on Asia.
Today, Swire's businesses are grouped into: property, aviation, beverages, marine services, and trading and industrial. As with Jardine Matheson, Hutchison Whampoa and others, these conglomerates are interesting ways to get a number of varying businesses under one umbrella. While periods of stagnation may occur or other concerns may arise (and previous performance is not an indicator of future performance), these companies have managed through good times and bad for many, many years.
Swire's key business is Aviation, which consists of a number of businesses, including engineering subsidiaries, airport services (including Hong Kong Airport Services Limited, which provides passenger service, cargo service and other operations at HKIA; Jardine also has operations of their own at HKIA) and airlines. The largest element of this arm of the business is Cathay Pacific Airlines, which Swire is the largest holder of at 43.97%. Cathay Pacific has been named "Airline of the Year" in the annual Skytrax World Airline Awards three times during the ten years that the awards have been running and recently started offering first/business class passengers (for a limited time and on flights from Hong Kong), high-end, Michelin star-graded meals from chefs at the company's hotel restaurants (more on those later.) While Cathay Pacific continues to be one of the world's best-reviewed and most highly regarded airlines, the success of the business is, of course, both sensitive to economic activity and input costs, and both have begun to be more of an issue recently, with oil heading higher and activity declining - while the company has recently stated that it expects a bump up in cargo activity in 2012, cargo activity declined 17.5% y/o/y in October 2011, the seventh consecutive decline (Story). Passenger traffic increased, but passenger load fell slightly.
While not one of the biggest revenue drivers for the company, the Beverage Division is particularly interesting, as Swire is an anchor bottler for Coca-Cola, including Hong Kong, much of China, Taiwan and parts of the US. The company is one of the largest bottlers in the world and works closely with Coca-Cola. The company holds exclusive rights to sellCoca-Cola products to c. 450 MM consumers in Mainland China (413 MM), Taiwan (23 MM), Hong Kong (7 MM) and the USA (6 MM). The latest investor presentation for the beverage side of the business can be found here. The division's growth prospects would certainly appear bright, given its strong position in a growth market and ability/insight to market to the local audience and create locally appealing beverages and/or packaging/marketing. However, raw material costs once again play a significant part and have risen significantly in recent quarters. While not discussed much on the company website, the division did enter into an agreement with Campbell Soup in January 2011 to sell Campbell Soup in mainland China. This venture did produce a loss in the first half of 2011, which was in-line with expectations.
Properties includes commercial, retail and industrial property in Hong Kong, Mainland China and the UK. The properties group recently sold the Festival Walk property in Hong Kong for HK$18,800M, raising cash for other potential opportunities. Other property holdings include Pacific Place and Island East in Hong Kong, as well as other Hong Kong, Mainland China and UK properties, as well as some US real estate (primarily in Florida, including in the Mandarin Oriental Miami.) The property unit has been discussed as a potential spin-off; plans were shelved in 2010 because of "market conditions", but plans have been restarted in 2011 and filings have been started. Growth prospects include the group's Asian hotels, which are beautifully designed, high-end boutiques, such as The Opposite House, as well as Chapter Hotels. Chapter is a new UK chain that will take inspiration on each location's look and feel from the surrounding area. At the point of interim results in August, 2011, the property group saw gains of HK$18,083m thanks to revaluation of properties in HK, as well as a remarkable 100% occupancy level in the group's HK malls. Gross rental income from the retail portfolio increased by 8% and there was retail sales growth of
17%. Hotels in the UK saw improved results, but tough conditions. However, the company's Asian hotels have seen significant improvement. The group expects continued strong performance from the HK commercial portfolio in the second half of 2011.
Another, smaller arm of the company is Swire Pacific Offshore, which provides services largely to the oil and gas industry, including tugboat, inspection/maintenance, platform supply and other additional services. The company's modern fleet is well-positioned across the globe to respond to a number of clients, including Exxon, CNOOC, Schlumberger, Chevron and Shell, among many others. The company has purchased an additional 27 vessels for delivery between 2011 and 2015. With increased activity in the offshore energy market, Swire Pacific Offshore should see continued demand in coming years after difficulty in 2010, although it will have to contend with higher costs and varying charter rates, among other issues.
Lastly, the Trading and Industrial group includes vehicle distribution/sales, sugar (Taikoo Sugar distributes sugar in Hong Kong and across mainland China) and paint (Akzo Nobel Swire Paints), as well as clothing (Swire Resources distributes and retails sportswear, footwear and casual clothing in mainland China and Hong Kong, and has the exclusive rights to a number of brands, including Teva and Champion.)
While not an investment recommendation, Swire remains an interesting array of varying businesses. The company has a number of core businesses with potential - including a Coke bottling business in a growth market, an innovative and exceptionally well-reviewed airline and offshore services. Still, these businesses - as well as a number of Swire's other businesses - are definitely sensitive to the economic environment and in some cases (such as the large aviation division) to higher input costs.
The company offers both A shares and B shares (the latter are more illiquid.) From the website: Notes: Because of the difference in nominal values, five 'B' shares are equivalent (in terms of cashflow rights, dividend payments etc.) to one 'A' share, while each share, whether 'A' or 'B', carries one vote at meetings of shareholders. The ADR A shares have an approximately 4% yield as of 11/19/11.
Swire Hotels Video:
A Look at Creating Cathay Pacific's New Business Class:
US Shares:
SWRAY (ADR A Share), SWRBY (ADR B Share), SWRAF (Ordinary A Share), SWRBF (Ordinary B Share)
Website: http://www.swirepacific.com/eng/global/home.php
Presentations:http://www.swirepacific.com/eng/ir/financialbriefings.php
Today, Swire's businesses are grouped into: property, aviation, beverages, marine services, and trading and industrial. As with Jardine Matheson, Hutchison Whampoa and others, these conglomerates are interesting ways to get a number of varying businesses under one umbrella. While periods of stagnation may occur or other concerns may arise (and previous performance is not an indicator of future performance), these companies have managed through good times and bad for many, many years.
Swire's key business is Aviation, which consists of a number of businesses, including engineering subsidiaries, airport services (including Hong Kong Airport Services Limited, which provides passenger service, cargo service and other operations at HKIA; Jardine also has operations of their own at HKIA) and airlines. The largest element of this arm of the business is Cathay Pacific Airlines, which Swire is the largest holder of at 43.97%. Cathay Pacific has been named "Airline of the Year" in the annual Skytrax World Airline Awards three times during the ten years that the awards have been running and recently started offering first/business class passengers (for a limited time and on flights from Hong Kong), high-end, Michelin star-graded meals from chefs at the company's hotel restaurants (more on those later.) While Cathay Pacific continues to be one of the world's best-reviewed and most highly regarded airlines, the success of the business is, of course, both sensitive to economic activity and input costs, and both have begun to be more of an issue recently, with oil heading higher and activity declining - while the company has recently stated that it expects a bump up in cargo activity in 2012, cargo activity declined 17.5% y/o/y in October 2011, the seventh consecutive decline (Story). Passenger traffic increased, but passenger load fell slightly.
While not one of the biggest revenue drivers for the company, the Beverage Division is particularly interesting, as Swire is an anchor bottler for Coca-Cola, including Hong Kong, much of China, Taiwan and parts of the US. The company is one of the largest bottlers in the world and works closely with Coca-Cola. The company holds exclusive rights to sellCoca-Cola products to c. 450 MM consumers in Mainland China (413 MM), Taiwan (23 MM), Hong Kong (7 MM) and the USA (6 MM). The latest investor presentation for the beverage side of the business can be found here. The division's growth prospects would certainly appear bright, given its strong position in a growth market and ability/insight to market to the local audience and create locally appealing beverages and/or packaging/marketing. However, raw material costs once again play a significant part and have risen significantly in recent quarters. While not discussed much on the company website, the division did enter into an agreement with Campbell Soup in January 2011 to sell Campbell Soup in mainland China. This venture did produce a loss in the first half of 2011, which was in-line with expectations.
Properties includes commercial, retail and industrial property in Hong Kong, Mainland China and the UK. The properties group recently sold the Festival Walk property in Hong Kong for HK$18,800M, raising cash for other potential opportunities. Other property holdings include Pacific Place and Island East in Hong Kong, as well as other Hong Kong, Mainland China and UK properties, as well as some US real estate (primarily in Florida, including in the Mandarin Oriental Miami.) The property unit has been discussed as a potential spin-off; plans were shelved in 2010 because of "market conditions", but plans have been restarted in 2011 and filings have been started. Growth prospects include the group's Asian hotels, which are beautifully designed, high-end boutiques, such as The Opposite House, as well as Chapter Hotels. Chapter is a new UK chain that will take inspiration on each location's look and feel from the surrounding area. At the point of interim results in August, 2011, the property group saw gains of HK$18,083m thanks to revaluation of properties in HK, as well as a remarkable 100% occupancy level in the group's HK malls. Gross rental income from the retail portfolio increased by 8% and there was retail sales growth of
17%. Hotels in the UK saw improved results, but tough conditions. However, the company's Asian hotels have seen significant improvement. The group expects continued strong performance from the HK commercial portfolio in the second half of 2011.
Another, smaller arm of the company is Swire Pacific Offshore, which provides services largely to the oil and gas industry, including tugboat, inspection/maintenance, platform supply and other additional services. The company's modern fleet is well-positioned across the globe to respond to a number of clients, including Exxon, CNOOC, Schlumberger, Chevron and Shell, among many others. The company has purchased an additional 27 vessels for delivery between 2011 and 2015. With increased activity in the offshore energy market, Swire Pacific Offshore should see continued demand in coming years after difficulty in 2010, although it will have to contend with higher costs and varying charter rates, among other issues.
Lastly, the Trading and Industrial group includes vehicle distribution/sales, sugar (Taikoo Sugar distributes sugar in Hong Kong and across mainland China) and paint (Akzo Nobel Swire Paints), as well as clothing (Swire Resources distributes and retails sportswear, footwear and casual clothing in mainland China and Hong Kong, and has the exclusive rights to a number of brands, including Teva and Champion.)
While not an investment recommendation, Swire remains an interesting array of varying businesses. The company has a number of core businesses with potential - including a Coke bottling business in a growth market, an innovative and exceptionally well-reviewed airline and offshore services. Still, these businesses - as well as a number of Swire's other businesses - are definitely sensitive to the economic environment and in some cases (such as the large aviation division) to higher input costs.
The company offers both A shares and B shares (the latter are more illiquid.) From the website: Notes: Because of the difference in nominal values, five 'B' shares are equivalent (in terms of cashflow rights, dividend payments etc.) to one 'A' share, while each share, whether 'A' or 'B', carries one vote at meetings of shareholders. The ADR A shares have an approximately 4% yield as of 11/19/11.
Swire Hotels Video:
A Look at Creating Cathay Pacific's New Business Class:
US Shares:
SWRAY (ADR A Share), SWRBY (ADR B Share), SWRAF (Ordinary A Share), SWRBF (Ordinary B Share)
Website: http://www.swirepacific.com/eng/global/home.php
Presentations:http://www.swirepacific.com/eng/ir/financialbriefings.php
Friday, November 18, 2011
MF Global and Random News
Some well-known financial names have started to come up in discussions about those who unfortunately found themselves in the middle of the MF Global mess - one of which is well-known trends forecaster Gerald Celente, who discusses his experience in an interview with King World News this week. Celente makes a good point in his interview - where is former MF Global CEO John Corzine?
____
It's amazing that there continues to be proof that the lessons of 2008 haven't been learned one bit - how many ways could this story go wrong?
"LONDON — The London Stock Exchange is becoming the lender of last resort for many banks in Italy as concerns over the country’s debt levels squeeze liquidity out of the Italian financial market. The money, which comes from collateral that traders must put up to complete financial transactions, is deposited with the banks to cover shortfalls in liquidity. CC&G earns a profit by charging banks interest on the money that they borrow."
_____
Trust in the market continues to be an issue (among others) for the retail investor, who continues to take money out of equity mutual funds. Bonds, however, continue to enjoy inflows. Overall money in mutual funds has decreased since December, 2010 (11,039.8B in Sept. 2011 vs 11,820.7B in Dec. 2010), although stock funds have seen the largest decline in assets.
Data From ICI
10/12/2011 10/19/2011 10/26/2011 11/2/2011 11/9/2011
Total Equity (in millions) -7,397 -3,288 -3,887 -3,280 -4,643
Total Bond (in millions) 3,954 5,649 4,908 3,067 4,214
_______
New Mutual Fund/ETF Filings:
Pimco EQS Dividend Fund & Pimco Dividend and Income Builder. No manager named in filing and no symbol named. Former is a dividend income fund that has the capability to short, while the later is a balanced fixed income/equity fund that is also listed as having the ability to short. Both funds will most likely share one or more managers. Filing
IShares International Preferred Stock Index Fund (ETF) Filing
____
It's amazing that there continues to be proof that the lessons of 2008 haven't been learned one bit - how many ways could this story go wrong?
"LONDON — The London Stock Exchange is becoming the lender of last resort for many banks in Italy as concerns over the country’s debt levels squeeze liquidity out of the Italian financial market. The money, which comes from collateral that traders must put up to complete financial transactions, is deposited with the banks to cover shortfalls in liquidity. CC&G earns a profit by charging banks interest on the money that they borrow."
_____
Trust in the market continues to be an issue (among others) for the retail investor, who continues to take money out of equity mutual funds. Bonds, however, continue to enjoy inflows. Overall money in mutual funds has decreased since December, 2010 (11,039.8B in Sept. 2011 vs 11,820.7B in Dec. 2010), although stock funds have seen the largest decline in assets.
Data From ICI
10/12/2011 10/19/2011 10/26/2011 11/2/2011 11/9/2011
Total Equity (in millions) -7,397 -3,288 -3,887 -3,280 -4,643
Total Bond (in millions) 3,954 5,649 4,908 3,067 4,214
_______
New Mutual Fund/ETF Filings:
Pimco EQS Dividend Fund & Pimco Dividend and Income Builder. No manager named in filing and no symbol named. Former is a dividend income fund that has the capability to short, while the later is a balanced fixed income/equity fund that is also listed as having the ability to short. Both funds will most likely share one or more managers. Filing
IShares International Preferred Stock Index Fund (ETF) Filing
Sunday, November 13, 2011
But There's No Inflation, Right?
...We're continually told by the media and the Fed that either "no" or that it's "not a worry."
"A meal for 10 people on the holiday, which falls on Nov. 24 this year, will rise to $49.20 from $43.47 last year, the biggest increase since 1990, based on foods traditionally served including stuffing and pumpkin pie, the farm group said today in a release. Turkey was the most expensive and had the biggest gain, with a 16-pound bird up 22 percent at $21.57. Other Thanksgiving cost increase in the annual Farm Bureau survey include a 17 percent gain for a pound of frozen green peas, 16 percent for a 30-ounce can of pumpkin-pie mix, a 15 percent for a half-pint of whipping cream, 13 percent for a gallon of whole milk, 9 percent for a 14-ounce bag of stuffing mix, 8.5 percent for 12 rolls, 2.9 percent for fresh cranberries and 2.2 percent for a three pounds of sweet potatoes."
Story
Video:
"A meal for 10 people on the holiday, which falls on Nov. 24 this year, will rise to $49.20 from $43.47 last year, the biggest increase since 1990, based on foods traditionally served including stuffing and pumpkin pie, the farm group said today in a release. Turkey was the most expensive and had the biggest gain, with a 16-pound bird up 22 percent at $21.57. Other Thanksgiving cost increase in the annual Farm Bureau survey include a 17 percent gain for a pound of frozen green peas, 16 percent for a 30-ounce can of pumpkin-pie mix, a 15 percent for a half-pint of whipping cream, 13 percent for a gallon of whole milk, 9 percent for a 14-ounce bag of stuffing mix, 8.5 percent for 12 rolls, 2.9 percent for fresh cranberries and 2.2 percent for a three pounds of sweet potatoes."
Story
Video:
EFSF: Bending Mathematics (aka "There is No Spoon")
"The European Financial Stability Facility (EFSF) last week announced it had successfully sold a €3bn 10-year bond in support of Ireland.
However, The Sunday Telegraph can reveal that target was only met after the EFSF resorted to buying up several hundred million euros worth of the bonds.
Sources said the EFSF had spent more than € 100m buying up its own bonds to help it achieve its funding target after the banks leading the deal were only able to find about €2.7bn of outside demand for the debt"
Story
We live in a world where arithmetic is tweaked and bent in an attempt to smooth reality into what politicians or those in the financial industry want or need. Simply, entities operating with the philosophy that they aren't insolvent if there are still checks, or playing shell games of moving money from one pocket to another. Greece and some additional Euro nations are insolvent, unfortunately. Yet, we get bailouts, interventions, various programs (EFSF) and other tweaks that - at the end of the day - are done to mask the true underlying condition. Other countries that aren't quite in the same financial condition will at some point likely choose to focus on their own internal problems rather than continue to be the buyer of last resort. China has been rumored to be bailing out the Eurozone on too many occasions to count recently, but China continues to appear increasingly reluctant to do so.
Europe has already come out and denied this Story, but the economic environment still remains built on sand and rumors. Eventually, the denials and the overly complex financial products that are designed to kick the can will cease to have the desired effect anymore, and reality will have to be faced. That won't come voluntarily (and if pushed far enough, this path will likely result in a considerable new financial crisis) most likely, and the developed world nations kicking the can all this time will only have added to the debt pile.
However, The Sunday Telegraph can reveal that target was only met after the EFSF resorted to buying up several hundred million euros worth of the bonds.
Sources said the EFSF had spent more than € 100m buying up its own bonds to help it achieve its funding target after the banks leading the deal were only able to find about €2.7bn of outside demand for the debt"
Story
We live in a world where arithmetic is tweaked and bent in an attempt to smooth reality into what politicians or those in the financial industry want or need. Simply, entities operating with the philosophy that they aren't insolvent if there are still checks, or playing shell games of moving money from one pocket to another. Greece and some additional Euro nations are insolvent, unfortunately. Yet, we get bailouts, interventions, various programs (EFSF) and other tweaks that - at the end of the day - are done to mask the true underlying condition. Other countries that aren't quite in the same financial condition will at some point likely choose to focus on their own internal problems rather than continue to be the buyer of last resort. China has been rumored to be bailing out the Eurozone on too many occasions to count recently, but China continues to appear increasingly reluctant to do so.
Europe has already come out and denied this Story, but the economic environment still remains built on sand and rumors. Eventually, the denials and the overly complex financial products that are designed to kick the can will cease to have the desired effect anymore, and reality will have to be faced. That won't come voluntarily (and if pushed far enough, this path will likely result in a considerable new financial crisis) most likely, and the developed world nations kicking the can all this time will only have added to the debt pile.
Saturday, November 12, 2011
Givaudan
I'd be willing to bet that when most people have a packaged food item or use a fragrance, they don't think about how that particular flavor or fragrance profile was created - most likely by a different company. This brings us to Swiss company Givaudan, the world's largest Flavor and Fragrance creator.
The largest company in the industry as of 2008 (others include International Flavors and Fragrances - IFF/US and Sensient Technologies - SXT/US; the latter also deals considerably with food coloring and inks, among other avenues), Givaudan creates custom produced flavors (usually sold under confidentiality agreements - there are four divisions: Beverages, Dairy, Savoury and Sweet Goods) and fragrances for both perfumes (Taylor Swift's new "Wonderstruck" perfume is an example of the company's recent work) and household products. In terms of flavors, the company's quest to create new flavor profiles and innovate is fascinating. Team members head out on "Tastetrek" adventures, going around the globe in an attempt to find new raw materials. As noted on the company's website: "TasteTrek™ is all about going in search of new tastes. They might be found in a rainforest, they might found be in a village in the middle of nowhere – but they will not be commonplace."
In terms of the "science of food", Givaudan is even working on a "bitterness blocker" that makes healthy foods like Broccoli a little less bitter. "Taste cells with particular receptors blanket the tongue. Scientists have recognized 27 receptors for different shades of bitterness, which along with salty, sweet, sour and savory (or umami), make up the human taste palate. The new-fangled bitterness blocker, known merely at this point as GIV3616, works by blocking some of the bitterness receptors." Story.
A primary issue for the company is the rising cost of raw materials (the company uses a stunning 14,000 different ingredients in their flavour and fragrance products from more than 50 countries) although the company is in a unique spot for the growing desire for many to eat healthier. The company's "TasteSolutions: Salt" offers the ability to use less salt in a product without heavily compromising taste. In terms of reduced fat products, the company provides "Tastesolutions: Mouthfeel" to provide a similar feel and aroma without as much in the way of fat and calories. The company's "PureDelivery" optimizes a product's flavor for the production-to-store trip, as the encapsulation technology helps keep flavors strong through the manufacturing process and protects from such issues as oxidation.
Healthier eating is a focus of the company, but there's a number of other avenues for the flavor business, such as the desire for more complex flavors in ready-to-drink beverages. Givaudan's expertise (or, in this case, experteas?) allows it to take the flavor profiles from any number of different teas (from the fundamental flavours of green, black, red white, flower – as well as varietals of these fundamental types such as Dragon Well (Long Jing), Oolong, Silver Needle, or Osmanthus), for its "TasteSolutions: Tea". The company is also doing similar work in coffee.
The amount of research and development that goes into a product is remarkable. For "TasteSolutions: Vanilla", the company held focus groups: "From Los Angeles to Shanghai, more than 150 of our new vanilla flavours, tastes, and concepts were chosen for consumer testing. Over the course of three years, our sensory team mapped 75 of the most popular vanilla ice creams with over 4,000 consumers from 20 different countries and identified preferences and drivers of liking."
For chicken: "Our TasteEssentials™ Chicken flavour programme is developing breakthrough natural ingredients that really capture the nuances of the taste of chicken.
From the kitchens of Moscow to the restaurants of Mexico, we at Givaudan have been on a global journey of culinary exploration to make sure that we really understand everything about chicken. We have explored the regional cuisines in China and Japan and visited traditional and modern restaurants in Europe to help us identify and create the most natural, rich and authentic flavours possible.
From chicken stocks, soups and bouillons, to grilled, fried, boiled and roasted chicken dishes, we explored the chicken flavour universe – talking with 7,300 consumers in 14 countries as well as the world's leading chefs across four continents."
On the perfume side of the company, the company has the unique offering of its legendary perfumery institute, which was opened in 1946 and claims to have trained perfumers responsible for a third of the fragrances on the market today. The company has created many award-winning fragrances, working with fashion designers, specialty retailers and other manufacturers to create memorable fragrances. The company's school ensures that it has a consistent stream of new talent. The company continues to try and innovate on the fragrance side, sourcing more than 200 natural materials for use in its perfumes, with a specialty collection of 50 for its Orpur range.
The company has discussed a detailed five-year plan, including an increased focus on developing markets and sustainable sourcing of raw materials.
The company's business is fairly reasonably balanced, with 54% of the business coming from the flavor division and 46 coming from the fragrance part of the business. Breaking it down further, beverages make up 37% of the flavor business, followed by savoury (ready-made meals, soups, sauces, meats, etc) and then Dairy and Sweet Goods provide the third and fourth spots in the flavor division. In the first 9 months of 2011, the flavor side saw 5% growth, while the fragrance section saw 4.4% growth. The company's raw materials costs, however, remain a burden: it is expected that materials will cost 15% higher in 2011 than 2010, and while the company is trying to pass off costs, that will only be able to be accomplished gradually over 2011 and 2012.
Half Year 2011 Financial Presentation
As noted with other profiles on this blog, this is not a recommendation to invest, but a profile of an interesting and unusual global company. That said, the industry is definitely one to watch: the "science of food" will be an increasingly important factor over the next decade, both for varying/evolving world consumer flavor demands and health issues (trying to use flavors and other innovations to allow for less salt, fat and other unhealthy substances to be used in food and still keep a satisfying, pleasing flavor.)
US: GVDNY (ADR shares)
Average Volume: 14,291 shares
Website:http://www.givaudan.com/
Five-Year Strategy: link
Flavor Global Trends:link
The largest company in the industry as of 2008 (others include International Flavors and Fragrances - IFF/US and Sensient Technologies - SXT/US; the latter also deals considerably with food coloring and inks, among other avenues), Givaudan creates custom produced flavors (usually sold under confidentiality agreements - there are four divisions: Beverages, Dairy, Savoury and Sweet Goods) and fragrances for both perfumes (Taylor Swift's new "Wonderstruck" perfume is an example of the company's recent work) and household products. In terms of flavors, the company's quest to create new flavor profiles and innovate is fascinating. Team members head out on "Tastetrek" adventures, going around the globe in an attempt to find new raw materials. As noted on the company's website: "TasteTrek™ is all about going in search of new tastes. They might be found in a rainforest, they might found be in a village in the middle of nowhere – but they will not be commonplace."
In terms of the "science of food", Givaudan is even working on a "bitterness blocker" that makes healthy foods like Broccoli a little less bitter. "Taste cells with particular receptors blanket the tongue. Scientists have recognized 27 receptors for different shades of bitterness, which along with salty, sweet, sour and savory (or umami), make up the human taste palate. The new-fangled bitterness blocker, known merely at this point as GIV3616, works by blocking some of the bitterness receptors." Story.
A primary issue for the company is the rising cost of raw materials (the company uses a stunning 14,000 different ingredients in their flavour and fragrance products from more than 50 countries) although the company is in a unique spot for the growing desire for many to eat healthier. The company's "TasteSolutions: Salt" offers the ability to use less salt in a product without heavily compromising taste. In terms of reduced fat products, the company provides "Tastesolutions: Mouthfeel" to provide a similar feel and aroma without as much in the way of fat and calories. The company's "PureDelivery" optimizes a product's flavor for the production-to-store trip, as the encapsulation technology helps keep flavors strong through the manufacturing process and protects from such issues as oxidation.
Healthier eating is a focus of the company, but there's a number of other avenues for the flavor business, such as the desire for more complex flavors in ready-to-drink beverages. Givaudan's expertise (or, in this case, experteas?) allows it to take the flavor profiles from any number of different teas (from the fundamental flavours of green, black, red white, flower – as well as varietals of these fundamental types such as Dragon Well (Long Jing), Oolong, Silver Needle, or Osmanthus), for its "TasteSolutions: Tea". The company is also doing similar work in coffee.
The amount of research and development that goes into a product is remarkable. For "TasteSolutions: Vanilla", the company held focus groups: "From Los Angeles to Shanghai, more than 150 of our new vanilla flavours, tastes, and concepts were chosen for consumer testing. Over the course of three years, our sensory team mapped 75 of the most popular vanilla ice creams with over 4,000 consumers from 20 different countries and identified preferences and drivers of liking."
For chicken: "Our TasteEssentials™ Chicken flavour programme is developing breakthrough natural ingredients that really capture the nuances of the taste of chicken.
From the kitchens of Moscow to the restaurants of Mexico, we at Givaudan have been on a global journey of culinary exploration to make sure that we really understand everything about chicken. We have explored the regional cuisines in China and Japan and visited traditional and modern restaurants in Europe to help us identify and create the most natural, rich and authentic flavours possible.
From chicken stocks, soups and bouillons, to grilled, fried, boiled and roasted chicken dishes, we explored the chicken flavour universe – talking with 7,300 consumers in 14 countries as well as the world's leading chefs across four continents."
On the perfume side of the company, the company has the unique offering of its legendary perfumery institute, which was opened in 1946 and claims to have trained perfumers responsible for a third of the fragrances on the market today. The company has created many award-winning fragrances, working with fashion designers, specialty retailers and other manufacturers to create memorable fragrances. The company's school ensures that it has a consistent stream of new talent. The company continues to try and innovate on the fragrance side, sourcing more than 200 natural materials for use in its perfumes, with a specialty collection of 50 for its Orpur range.
The company has discussed a detailed five-year plan, including an increased focus on developing markets and sustainable sourcing of raw materials.
The company's business is fairly reasonably balanced, with 54% of the business coming from the flavor division and 46 coming from the fragrance part of the business. Breaking it down further, beverages make up 37% of the flavor business, followed by savoury (ready-made meals, soups, sauces, meats, etc) and then Dairy and Sweet Goods provide the third and fourth spots in the flavor division. In the first 9 months of 2011, the flavor side saw 5% growth, while the fragrance section saw 4.4% growth. The company's raw materials costs, however, remain a burden: it is expected that materials will cost 15% higher in 2011 than 2010, and while the company is trying to pass off costs, that will only be able to be accomplished gradually over 2011 and 2012.
Half Year 2011 Financial Presentation
As noted with other profiles on this blog, this is not a recommendation to invest, but a profile of an interesting and unusual global company. That said, the industry is definitely one to watch: the "science of food" will be an increasingly important factor over the next decade, both for varying/evolving world consumer flavor demands and health issues (trying to use flavors and other innovations to allow for less salt, fat and other unhealthy substances to be used in food and still keep a satisfying, pleasing flavor.)
US: GVDNY (ADR shares)
Average Volume: 14,291 shares
Website:http://www.givaudan.com/
Five-Year Strategy: link
Flavor Global Trends:link
Friday, November 11, 2011
MF Global: Nothing Has Been Learned
Edited to add: the CME has decided to tap a slush fund (!) to help MF Global clients:Story
The MF Global saga continues today, and it's both deeply unfortunate for those clients who are involved in the mess and a negative for the investing community at large, as it is simply another event that erodes confidence in the financial industry. Confidence continues to slip, and that's likely at least a small part (among a number of other issues) of the reason why retail investors continue to pull money from mutual funds.
What's particularly displeasing is that a page on the MF Global website covering "Client Asset Protection" still remains, including a segment on segregated funds (see here), which they failed to do.
Sadly, some client money still remains unaccounted for, and while some customers have had their positions moved to other brokerages, cash remains tied up. The situation is a failure of regulation and the firm's leverage was also massive, which is remarkable only a few years after the 2008 crisis. "The firm's bad bets on European debt triggered a crisis of confidence in one of the most active commodity brokers in the world.
The Commodity Futures Trading Commission investigation follows the discovery that some $600 million was missing from segregated accounts, customer funds that are meant to be held separate from the broker's own money. There are growing concerns that regulators may be unable to find the missing customer funds, at least in a state where it can be paid back to creditors."
"The CFTC also said it would do a sweeping audit of all clearing futures commission merchants to ensure customer funds were properly segregated."
Story
History of MF Global and Current Situation
Legendary investor Eric Sprott discusses counter-party risk, leverage and loss of confidence in the banking system with James Turk in a must-watch new interview below:
The MF Global saga continues today, and it's both deeply unfortunate for those clients who are involved in the mess and a negative for the investing community at large, as it is simply another event that erodes confidence in the financial industry. Confidence continues to slip, and that's likely at least a small part (among a number of other issues) of the reason why retail investors continue to pull money from mutual funds.
What's particularly displeasing is that a page on the MF Global website covering "Client Asset Protection" still remains, including a segment on segregated funds (see here), which they failed to do.
Sadly, some client money still remains unaccounted for, and while some customers have had their positions moved to other brokerages, cash remains tied up. The situation is a failure of regulation and the firm's leverage was also massive, which is remarkable only a few years after the 2008 crisis. "The firm's bad bets on European debt triggered a crisis of confidence in one of the most active commodity brokers in the world.
The Commodity Futures Trading Commission investigation follows the discovery that some $600 million was missing from segregated accounts, customer funds that are meant to be held separate from the broker's own money. There are growing concerns that regulators may be unable to find the missing customer funds, at least in a state where it can be paid back to creditors."
"The CFTC also said it would do a sweeping audit of all clearing futures commission merchants to ensure customer funds were properly segregated."
Story
History of MF Global and Current Situation
Legendary investor Eric Sprott discusses counter-party risk, leverage and loss of confidence in the banking system with James Turk in a must-watch new interview below:
Thursday, November 10, 2011
Evening News
Disney Profit Jumps 30% on Cable/Parks: Story ("Disney CEO: Increased ratings in DVR households", "Disney CEO: DVRs increase TV viewing")
E-trade Has Decided Not to Sell Itself: Story (I'd think a merger with an Ameritrade or other large competitor would be an antitrust issue)
Nordstrom Boosts Profit 7%, Shares Fall on Outlook: Story (Kohl's earnings were up 20% yesterday, Macy's also raised its outlook.) Black Friday is also coming earlier this year, with Wal-Mart and others providing deals either the night before or starting at Midnight.
Groupon Stock Among Most Expensive to Short: Story
Tokyo Stock Exchange Warns Olympus Could Be Delisted:Story
Wal-Mart Corporate Video on Black Friday Events:
E-trade Has Decided Not to Sell Itself: Story (I'd think a merger with an Ameritrade or other large competitor would be an antitrust issue)
Nordstrom Boosts Profit 7%, Shares Fall on Outlook: Story (Kohl's earnings were up 20% yesterday, Macy's also raised its outlook.) Black Friday is also coming earlier this year, with Wal-Mart and others providing deals either the night before or starting at Midnight.
Groupon Stock Among Most Expensive to Short: Story
Tokyo Stock Exchange Warns Olympus Could Be Delisted:Story
Wal-Mart Corporate Video on Black Friday Events:
Morning News Items
Caterpillar is in talks this morning to buy Chinese firm ERA Mining. This comes shortly after Yum Brands had their takeover of Mongolian Hot Pot chain Little Sheep approved. Story.
Bank of England leaves monetary policy unchanged. Story
Greece names Lucas Papademos new prime minister. Story
Viacom Beats Estimates, Boosts Buyback: Story
US Trade Deficit Narrows in September: Story
Ex Olympus Officials May Face Charges if Fraud Proved: Story
Solar Glut to Worsen After Prices Plunge: Story
Italy Sells Bills at Highest Rate in 14 Years:Story
An overview of a meal at a Little Sheep restaurant:
Bank of England leaves monetary policy unchanged. Story
Greece names Lucas Papademos new prime minister. Story
Viacom Beats Estimates, Boosts Buyback: Story
US Trade Deficit Narrows in September: Story
Ex Olympus Officials May Face Charges if Fraud Proved: Story
Solar Glut to Worsen After Prices Plunge: Story
Italy Sells Bills at Highest Rate in 14 Years:Story
An overview of a meal at a Little Sheep restaurant:
Self-Freezing Coke?
Self-freezing coke on the streets of Hong Kong. Why isn't this available in the US? It would be a huge seller during the Summer. Additionally, for those unaware to changes in hip lingo, "quaff" is the new "swig".
Somewhere Jon Stewart Is Pleased
This blog is not intended to be political and I won't comment much directly on this (because, well, no comment necessary, really), but geez. Somewhere, Jon Stewart is pleased - this is a couple of "Daily Show"'s worth of material right here. I'm sure a remixed, autotuned version will likely be posted somewhere online any day now. I especially like Ron Paul's "five" comment at 1:46 or so (which he also shows to the audience.) If you listen closely, Romney also shouts out "EPA" at one point in the background. Politicians can't seem to work together to solve major issues, but some of them are happy to work together when another one forgets his rather important speech.
The author is neither republican or democrat, but simply believes that both sides need to take the (unfortunately unlikely) step to put differences aside and work together, because the issues facing this country (and the world) are serious enough that putting them off or playing politics instead may lead to a worse crisis. Whether left wing or right wing (or "West Wing", "Wings" or "Wind Beneath My Wings"), at the core, everyone's just trying to make it through the day and despite people's differences, everyone would like to see considerable work done towards making this world a better place for future generations. We have to demand greatness and exceptional leadership from our elected officials (whether republican, democrat or martian), and expect no less.
Wednesday, November 9, 2011
Brief: Jefferson County Alabama Declares Bankruptcy
A detailed discussion of the events leading up to this point can be found at this link. This will be the largest muni bankruptcy in US history.
Full Story
Updated to add: the County's Bankruptcy Lawyer Explains The Situation:
Full Story
Updated to add: the County's Bankruptcy Lawyer Explains The Situation:
David Einhorn Was Right...
...at least for now (although for later is certainly quite the possibility, too.) Green Mountain Coffee Roasters (GMCR) drops 24% (was down a bit over 30% earlier) after its earnings call this evening. Net sales for the period were far below expectations, at $711 million. Analysts polled by Bloomberg were looking for revenue of $760 million. Story
Greenlight Capital hedge fund manager David Einhorn's remarkably detailed (and amusingly titled) full 110-page report stating his short case on the Coffee company at the link below.
GAAP-uchino
Speaking of coffee, Starbucks CEO Howard Schultz's recent book, "Onward" is an excellent look at how the coffee retailer has approached business over the last few years.
A Look at Green Mountain's Production Process:
Greenlight Capital hedge fund manager David Einhorn's remarkably detailed (and amusingly titled) full 110-page report stating his short case on the Coffee company at the link below.
GAAP-uchino
Speaking of coffee, Starbucks CEO Howard Schultz's recent book, "Onward" is an excellent look at how the coffee retailer has approached business over the last few years.
A Look at Green Mountain's Production Process:
Jeffries: Not Convinced?
After a number of denials, detailed reports on European exposure and more (including main investor Leucadia adding a substantial amount to their existing investment), Jefferies is still down nearly 10% today. Given the events of the day in Europe and the recent situation with MF Global, it becomes an instance of - as discussed earlier - loss of confidence. Jefferies can provide another and another (and another) explanation of its holdings, but if the market doesn't buy it, it's sell first and ask questions later (which can become a negative feedback loop.)
The firm has offered presentations of its levels of European exposure (see here and for greater detail here) and kept updating investors (see here), but while the stock has rebounded from the sudden 20% loss a few days ago, the market still seems to be unconvinced.
Rating agency Eagan-Jones is not budging from its downgrade of the firm recently, as present Sean Eagan discussed (or, better yet, argued with the CNBC anchors who sensed they weren't getting the positive take they wanted) in the clip below. Eagan also provides an excellent discussion of the European situation.
The firm has offered presentations of its levels of European exposure (see here and for greater detail here) and kept updating investors (see here), but while the stock has rebounded from the sudden 20% loss a few days ago, the market still seems to be unconvinced.
Rating agency Eagan-Jones is not budging from its downgrade of the firm recently, as present Sean Eagan discussed (or, better yet, argued with the CNBC anchors who sensed they weren't getting the positive take they wanted) in the clip below. Eagan also provides an excellent discussion of the European situation.
Wynn Macau
Today's destination #2 is Macau, one two special administrative regions of the People's Republic of China.
Many are more than likely familiar with Wynn Resorts, run by legendary casino operator Steve Wynn. The stock, which is traded on the NYSE (WYNN) has enjoyed a remarkable rise in the last few years, currently at a little over $125 a share.
Wynn has operations in both Vegas (Wynn and Encore) as well as Macau (Wynn and Encore). The Wynn Macau offers 600 hotel rooms and suites, approximately 212 table games and 375 slot machines in approx 205,000 square feet (19,000 m2) of casino gaming space, five restaurants, 26,000 square feet of retail space and much more.
While Wynn's Vegas operations have rebounded reasonably well since the 2008 downturn, it's the Macau operations that are largely responsible for sending the stock soaring.
In terms of Wynn's recent earnings call:
For the Vegas operation:
For the third quarter ended September 30, 2011, net revenues for our Las Vegas operations were $346.9 million, 3.7% higher than in the third quarter of 2010.
For the Macau operation:
In the third quarter of 2011, net revenues were $951.4 million, a 41.7% increase from the $671.4 million generated in the third quarter of 2010.
The one area where Macau has not seen the same level of business is the non-gaming operations.
Gross non-casino revenues at Wynn Macau increased 32.4% during the quarter to $102.6 million, driven by strong performance from all non-casino segments.
Gross non-casino revenues for Wynn Las Vegas for the quarter were $265.9 million, an 11.1% increase from the third quarter of 2010, driven by higher revenues across all non-gaming segments.
While many think the current economic fundamentals will cause an erosion of the growth in Macau, the recent statistics continue to prove otherwise, as the stock has rebounded from a few sizable dips over the last year that have been brought on by such concerns. Regional growth and rising wages have also likely contributed to sustained business activity at Macau's casinos. Still, nothing grows to the sky, and while Macau will likely to continue to remain a tourist destination, the current growth rates are almost certainly not sustainable. For the meantime, however, casino operators continue to see growth that has continued to exceed expectations - and that could certainly continue over the longer-term, with some bumps in the short-term.
Speaking of "bumps", Wynn Macau - as well as other Macau casino stocks (such as Sands China) are extremely volatile, and not for the timid: they are exceptionally susceptible to any fears of a slowdown, especially in regards to VIP revenue. "About two-thirds of Macau’s gambling revenue is from high-roller VIPs, who play in specially designated rooms and bet with credit supplied by junket organizers." http://www.marketwatch.com/story/macau-casino-stocks-hit-by-vip-revenue-worry-2011-10-03?siteid=yhoof. Another issue with the casino stocks is Macau's regulations, which - understandably - are trying to place some limits on gambling in order to try to diversify Macau and attract a more widely varied tourist audience. This month, the government confirmed its stance that the number of gaming tables would be limited to 5,500 until 2013 - and the amount currently in operation is not much less than that. Macau has also encouraged companies to expand non-gaming operations. A massive bridge project linking Hong Kong-Zhuhai-Macau will also likely help increase tourism, although it is not expected to be complete until 2015-2016.
Wynn also is on track to open another casino in 2014-2015 in the Cotai district of Macau.
In terms of October, 2011:
"Gambling revenue in the Chinese territory rose to MOP26.85 billion (US$3.36 billion) in October, up from MOP18.87 billion in the same month a year earlier, data from Macau's Gaming Inspection and Coordination Bureau showed.
October's revenue haul beat the territory's previous high of MOP24.77 billion hit in August. It was boosted by China's "golden week" holidays, which fall in May and October. The former Portuguese colony, an hour from Hong Kong by ferry, is the only place in China in which casino gambling is legal, helping revenue there exceed that of neon rival Las Vegas fivefold. The October revenue figure of $3.4 billion is more than half of what Las Vegas is expected to make for the whole of 2011."
http://www.reuters.com/article/2011/11/01/uk-macau-revenue-idUSLNE7A002R20111101
All that said, while Wynn is at $125, some may not be aware that the Wynn Macau operation is listed separately on the Hong Kong market, with ADR and foreign ordinary shares available in the US. The US foreign ordinary shares are - at least as of 11/9/11, $2.86. As with other foreign stock posts on this blog, this is not an investment recommendation, but - in this case - an attempt to show how a foreign portion of a company's operations may be listed separately. There are other examples of this, which will be profiled in future entries.
US Stock: WYNMF (foreign ordinary), WYNMY (ADR)
Avg volume: 58,030 (3m/as of 11/9/11)
Hong Kong: 1128.HK
Avg volume: 11,998,000 (3m/as of 11/9/11)
Website: http://www.wynnresorts.com/
Recent Investor Presentation: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDQwODA4fENoaWxkSUQ9NDYyNjQ1fFR5cGU9MQ==&t=1
Many are more than likely familiar with Wynn Resorts, run by legendary casino operator Steve Wynn. The stock, which is traded on the NYSE (WYNN) has enjoyed a remarkable rise in the last few years, currently at a little over $125 a share.
Wynn has operations in both Vegas (Wynn and Encore) as well as Macau (Wynn and Encore). The Wynn Macau offers 600 hotel rooms and suites, approximately 212 table games and 375 slot machines in approx 205,000 square feet (19,000 m2) of casino gaming space, five restaurants, 26,000 square feet of retail space and much more.
While Wynn's Vegas operations have rebounded reasonably well since the 2008 downturn, it's the Macau operations that are largely responsible for sending the stock soaring.
In terms of Wynn's recent earnings call:
For the Vegas operation:
For the third quarter ended September 30, 2011, net revenues for our Las Vegas operations were $346.9 million, 3.7% higher than in the third quarter of 2010.
For the Macau operation:
In the third quarter of 2011, net revenues were $951.4 million, a 41.7% increase from the $671.4 million generated in the third quarter of 2010.
The one area where Macau has not seen the same level of business is the non-gaming operations.
Gross non-casino revenues at Wynn Macau increased 32.4% during the quarter to $102.6 million, driven by strong performance from all non-casino segments.
Gross non-casino revenues for Wynn Las Vegas for the quarter were $265.9 million, an 11.1% increase from the third quarter of 2010, driven by higher revenues across all non-gaming segments.
While many think the current economic fundamentals will cause an erosion of the growth in Macau, the recent statistics continue to prove otherwise, as the stock has rebounded from a few sizable dips over the last year that have been brought on by such concerns. Regional growth and rising wages have also likely contributed to sustained business activity at Macau's casinos. Still, nothing grows to the sky, and while Macau will likely to continue to remain a tourist destination, the current growth rates are almost certainly not sustainable. For the meantime, however, casino operators continue to see growth that has continued to exceed expectations - and that could certainly continue over the longer-term, with some bumps in the short-term.
Speaking of "bumps", Wynn Macau - as well as other Macau casino stocks (such as Sands China) are extremely volatile, and not for the timid: they are exceptionally susceptible to any fears of a slowdown, especially in regards to VIP revenue. "About two-thirds of Macau’s gambling revenue is from high-roller VIPs, who play in specially designated rooms and bet with credit supplied by junket organizers." http://www.marketwatch.com/story/macau-casino-stocks-hit-by-vip-revenue-worry-2011-10-03?siteid=yhoof. Another issue with the casino stocks is Macau's regulations, which - understandably - are trying to place some limits on gambling in order to try to diversify Macau and attract a more widely varied tourist audience. This month, the government confirmed its stance that the number of gaming tables would be limited to 5,500 until 2013 - and the amount currently in operation is not much less than that. Macau has also encouraged companies to expand non-gaming operations. A massive bridge project linking Hong Kong-Zhuhai-Macau will also likely help increase tourism, although it is not expected to be complete until 2015-2016.
Wynn also is on track to open another casino in 2014-2015 in the Cotai district of Macau.
In terms of October, 2011:
"Gambling revenue in the Chinese territory rose to MOP26.85 billion (US$3.36 billion) in October, up from MOP18.87 billion in the same month a year earlier, data from Macau's Gaming Inspection and Coordination Bureau showed.
October's revenue haul beat the territory's previous high of MOP24.77 billion hit in August. It was boosted by China's "golden week" holidays, which fall in May and October. The former Portuguese colony, an hour from Hong Kong by ferry, is the only place in China in which casino gambling is legal, helping revenue there exceed that of neon rival Las Vegas fivefold. The October revenue figure of $3.4 billion is more than half of what Las Vegas is expected to make for the whole of 2011."
http://www.reuters.com/article/2011/11/01/uk-macau-revenue-idUSLNE7A002R20111101
All that said, while Wynn is at $125, some may not be aware that the Wynn Macau operation is listed separately on the Hong Kong market, with ADR and foreign ordinary shares available in the US. The US foreign ordinary shares are - at least as of 11/9/11, $2.86. As with other foreign stock posts on this blog, this is not an investment recommendation, but - in this case - an attempt to show how a foreign portion of a company's operations may be listed separately. There are other examples of this, which will be profiled in future entries.
US Stock: WYNMF (foreign ordinary), WYNMY (ADR)
Avg volume: 58,030 (3m/as of 11/9/11)
Hong Kong: 1128.HK
Avg volume: 11,998,000 (3m/as of 11/9/11)
Website: http://www.wynnresorts.com/
Recent Investor Presentation: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDQwODA4fENoaWxkSUQ9NDYyNjQ1fFR5cGU9MQ==&t=1
New Book: Currency Wars
"Currency Wars", the new book from Jim Rickards, is now available. This is a terrific book on geopolitics and the current state of global finance. A full review will be posted later this week.
About the Author
James Rickards is a counselor, investment banker, and risk manager with over thirty years' experience in capital markets. He advises the Department of Defense, the U.S. intelligence community, and major hedge funds on global finance, and served as a facilitator of the first ever financial war games conducted by the Pentagon.
Rickards has also provided an excellent new audio interview on King World News this weekend.
Additionally, Rickards discussed the book and provided a short but quite interesting chat on the topic of global currency manipulation on CNBC this week.
About the Author
James Rickards is a counselor, investment banker, and risk manager with over thirty years' experience in capital markets. He advises the Department of Defense, the U.S. intelligence community, and major hedge funds on global finance, and served as a facilitator of the first ever financial war games conducted by the Pentagon.
Rickards has also provided an excellent new audio interview on King World News this weekend.
Additionally, Rickards discussed the book and provided a short but quite interesting chat on the topic of global currency manipulation on CNBC this week.
Oil Heading Higher
Thanks a little bit to concerns about further bailouts and largely thanks to a decline in inventories, oil has headed higher mid-day to around $98 a barrel.
"the Energy Information Administration said crude inventories declined 1.4 million barrels in the week ended Nov. 4.
Gasoline inventories declined 2.1 million barrels, while distillates supplies were off 6 million barrels, the EIA said.
Analysts polled by Platts had expected crude oil stocks to rise 1 million barrels, gasoline stocks to decline 400,000 barrels, and distillates stocks to be down 2.5 million barrels."
http://www.marketwatch.com/story/oil-off-three-month-high-on-euro-zone-worries-2011-11-09?link=MW_latest_news
Certainly not good for consumers (may effect retail stocks) and many industries (airlines, for example), and it's more than a little concerning that oil looks to possibly head over the $100 barrier once again. Still, oil stocks largely not following: OIH (Oil Services ETF) down a little over 3.5%, while energy select SPDR (XLE) down 2.5%.
Oil and Gas Drilling Explanation Video:
"the Energy Information Administration said crude inventories declined 1.4 million barrels in the week ended Nov. 4.
Gasoline inventories declined 2.1 million barrels, while distillates supplies were off 6 million barrels, the EIA said.
Analysts polled by Platts had expected crude oil stocks to rise 1 million barrels, gasoline stocks to decline 400,000 barrels, and distillates stocks to be down 2.5 million barrels."
http://www.marketwatch.com/story/oil-off-three-month-high-on-euro-zone-worries-2011-11-09?link=MW_latest_news
Certainly not good for consumers (may effect retail stocks) and many industries (airlines, for example), and it's more than a little concerning that oil looks to possibly head over the $100 barrier once again. Still, oil stocks largely not following: OIH (Oil Services ETF) down a little over 3.5%, while energy select SPDR (XLE) down 2.5%.
Oil and Gas Drilling Explanation Video:
Italian Bonds and Europe
Markets are riled up this morning thanks to Italian bonds passing beyond the 7% level, presenting considerable concerns about increased funding costs. Beyond that, a great deal of complex discussion can be made regarding the yields moving in a negative direction, but one can largely point towards a lack of confidence. In terms of financial markets, whether it be a stock or a sovereign nation, once investor confidence is lost, it's quite difficult to regain. Making the situation even worse is the potential domino effect that looms in Europe in regards to financial stability of Italy, Greece and the other PIIGS. Beyond that, the other layer continues to be worries about who has exposure to what as financial companies continue to defend, deny or otherwise debate their exposure to Europe (see Jefferies/JEF, which saw a spectacular decline mid-day a couple of days ago of 20%, only to rebound after the company offered a detailed discussion of what exposure it has.)
While the ECB can come up with any number of complex plans (rumors work pretty well, too, including the now-familiar rumor that China will run to Europe's rescue, which is often denied within hours), such as the EFSF http://en.wikipedia.org/wiki/European_Financial_Stability_Facility, the underlying arithmetic can't be argued with and all of the interventions (such as the reported ECB intervention this morning) simply result in a bigger bill when the can can't be kicked down the road further or another crisis if the path of interventions and bailouts continues to be followed. Italy's debt burden is currently an astonishing 1.9T Euros.
Sadly, while Europe is facing a financial downpour, areas are also facing a literal one, as torrential rain is causing flooding in France and Italy.
European Parliament member Nigel Farage offers an excellent discussion of the current situation in an audio interview today at King World News.
Euro now heading lower, as well. Double short Euro ETN chart below.
links:
http://www.reuters.com/article/2011/11/09/us-markets-global-idUSTRE79N45620111109?feedType=RSS&feedName=topNews&rpc=71
http://online.wsj.com/article/SB10001424052970204358004577027492657312740.html?mod=googlenews_wsj
While the ECB can come up with any number of complex plans (rumors work pretty well, too, including the now-familiar rumor that China will run to Europe's rescue, which is often denied within hours), such as the EFSF http://en.wikipedia.org/wiki/European_Financial_Stability_Facility, the underlying arithmetic can't be argued with and all of the interventions (such as the reported ECB intervention this morning) simply result in a bigger bill when the can can't be kicked down the road further or another crisis if the path of interventions and bailouts continues to be followed. Italy's debt burden is currently an astonishing 1.9T Euros.
Sadly, while Europe is facing a financial downpour, areas are also facing a literal one, as torrential rain is causing flooding in France and Italy.
European Parliament member Nigel Farage offers an excellent discussion of the current situation in an audio interview today at King World News.
Euro now heading lower, as well. Double short Euro ETN chart below.
links:
http://www.reuters.com/article/2011/11/09/us-markets-global-idUSTRE79N45620111109?feedType=RSS&feedName=topNews&rpc=71
http://online.wsj.com/article/SB10001424052970204358004577027492657312740.html?mod=googlenews_wsj
SMRT
The blog's first post travels to Singapore. This is not a recommendation to invest in this company, but simply a desire to highlight the kind of interesting investments available in various parts of the globe.
SMRT, obviously not to be confused with the "Simpsons" reference...
...is a sleek, modern transit system that serves Singapore, providing bus, train (both larger MRT Mass Rapid Transit and LRT Light Rail) and taxi service. Going beyond transit, the company also brings in revenue from renting advertising space, engineering consultancy (including efforts in other Asian territories and the Middle East, as well as Brazil), renting commercial space (retail space within stations, for example, and more stations are being renovated with a benefit being increased rental space) and more. The structure of the corporation can be seen at this link. Assets under the corporation stand at 1.6B (in Singapore Dollars) and Singapore's sovereign wealth fund (Temasek) owns a bit over 54%.
Rarely does one see transit infrastructure available for investment in the United States, but investing in airports and other such significant transit in a growing economy is an interesting proposition. Full year total ridership in FY2006 was 413.8M and FY2010 was 536M. The company does a remarkable job trying to maintain a high standard of performance against its benchmarks, set by the Land Transit Authority. One particular benchmark - at least 94% within 2 minutes of schedule weekly - saw the company achieve a success rate of a little over 97%.
Benchmarks:
at least 94% of trains arrive within 2 minutes of schedule;
at least 96% of trains depart within 2 minutes of schedule;
train service availability will be at least 98%;
downtime of not more than 500 hours per 10,000 hours of operation for general ticketing machines;
downtime of not more than 500 hours per 10,000 hours of operation for ticket gates;
downtime of not more than 200 hours per 10,000 hours of operation for lifts; and
downtime of not more than 100 hours per 10,000 hours of operation for escalators.
Eventually, ridership growth will slow, but given the company's plans, that may not happen any time soon. A number of new lines that extend the train system further outward are planned, with timelines out to 2020. The Singapore Government has announced plans to spend $60B (S$) to expand the rail network over the next decade. Even if growth does slow, the essential need of the "product" - getting people from here-to-there - will likely give the stock some degree of stability over time. SMRT's dividend policy is to attempt to maintain or grow the dividend yearly, and possibly offer special dividends in an attempt to increase shareholder value.
Fares will also likely increase, although the issue becomes that the area's transit operators (see also ComfortDelGro) have to seek approval from the Public Transport Counsel. Negatives include higher energy costs and expenses, which did eat into the bottom line recently. The requirement of having to request the ability to raise fares from a government organization is also restrictive. The company did present in their recent quarter some definite concerns about FY2012 - while ridership is expected to likely continue higher, if fuel costs do stay high, that will continue to pose a definite problem for the company's bottom line.
Still, the company continues to be progressive, not only by expanding its modern fleet, but by increasing the capacity to advertise - not only in the traditional sense, but with innovative digital advertising (projection, digital screens, video walls.) That said, even the traditional advertising is tastefully, cleanly presented and attractive (see page 34 of the company's recent Investor Presentation. Advertising and rental revenue did increase nicely year/over/year in 2011 - ad revenue up 12.6%, rental revenue up 13.1%. The company's transit cards are also certainly quite modern - passengers use contactless smart cards.
Speaking of clean, photos and video of the trains and stations do make them look crisp and clean, and the reason for that may be in part due to the fine for eating and drinking. No food or drink may be consumed on the trains or in stations. Doing so can result in a $500 fine.
The company does face some issues - primarily rising costs (especially rising fuel costs), but is an interesting example of the kind of transit infrastructure that can be invested in in some overseas markets.
SMRT video overview:
Note: How cool is the electronic map at 1:25, showing next stop?
US Trading?: Yes
Symbol: SPMRY (ADR share)
Trades in US: Rarely ever. Very, very illiquid.
Latest Investor Presentation: http://www.smrt.com.sg/investors/documents/presentations/DB_Conference_Investor_presentation_1QFY12.pdf
Website: http://www.smrt.com.sg/
Foreign Symbol: Singapore (S53.si)
Trades in Singapore: 771,161 (3mo avg vol as of 11/9/11)
SMRT, obviously not to be confused with the "Simpsons" reference...
...is a sleek, modern transit system that serves Singapore, providing bus, train (both larger MRT Mass Rapid Transit and LRT Light Rail) and taxi service. Going beyond transit, the company also brings in revenue from renting advertising space, engineering consultancy (including efforts in other Asian territories and the Middle East, as well as Brazil), renting commercial space (retail space within stations, for example, and more stations are being renovated with a benefit being increased rental space) and more. The structure of the corporation can be seen at this link. Assets under the corporation stand at 1.6B (in Singapore Dollars) and Singapore's sovereign wealth fund (Temasek) owns a bit over 54%.
Rarely does one see transit infrastructure available for investment in the United States, but investing in airports and other such significant transit in a growing economy is an interesting proposition. Full year total ridership in FY2006 was 413.8M and FY2010 was 536M. The company does a remarkable job trying to maintain a high standard of performance against its benchmarks, set by the Land Transit Authority. One particular benchmark - at least 94% within 2 minutes of schedule weekly - saw the company achieve a success rate of a little over 97%.
Benchmarks:
at least 94% of trains arrive within 2 minutes of schedule;
at least 96% of trains depart within 2 minutes of schedule;
train service availability will be at least 98%;
downtime of not more than 500 hours per 10,000 hours of operation for general ticketing machines;
downtime of not more than 500 hours per 10,000 hours of operation for ticket gates;
downtime of not more than 200 hours per 10,000 hours of operation for lifts; and
downtime of not more than 100 hours per 10,000 hours of operation for escalators.
Eventually, ridership growth will slow, but given the company's plans, that may not happen any time soon. A number of new lines that extend the train system further outward are planned, with timelines out to 2020. The Singapore Government has announced plans to spend $60B (S$) to expand the rail network over the next decade. Even if growth does slow, the essential need of the "product" - getting people from here-to-there - will likely give the stock some degree of stability over time. SMRT's dividend policy is to attempt to maintain or grow the dividend yearly, and possibly offer special dividends in an attempt to increase shareholder value.
Fares will also likely increase, although the issue becomes that the area's transit operators (see also ComfortDelGro) have to seek approval from the Public Transport Counsel. Negatives include higher energy costs and expenses, which did eat into the bottom line recently. The requirement of having to request the ability to raise fares from a government organization is also restrictive. The company did present in their recent quarter some definite concerns about FY2012 - while ridership is expected to likely continue higher, if fuel costs do stay high, that will continue to pose a definite problem for the company's bottom line.
Still, the company continues to be progressive, not only by expanding its modern fleet, but by increasing the capacity to advertise - not only in the traditional sense, but with innovative digital advertising (projection, digital screens, video walls.) That said, even the traditional advertising is tastefully, cleanly presented and attractive (see page 34 of the company's recent Investor Presentation. Advertising and rental revenue did increase nicely year/over/year in 2011 - ad revenue up 12.6%, rental revenue up 13.1%. The company's transit cards are also certainly quite modern - passengers use contactless smart cards.
Speaking of clean, photos and video of the trains and stations do make them look crisp and clean, and the reason for that may be in part due to the fine for eating and drinking. No food or drink may be consumed on the trains or in stations. Doing so can result in a $500 fine.
The company does face some issues - primarily rising costs (especially rising fuel costs), but is an interesting example of the kind of transit infrastructure that can be invested in in some overseas markets.
SMRT video overview:
Note: How cool is the electronic map at 1:25, showing next stop?
US Trading?: Yes
Symbol: SPMRY (ADR share)
Trades in US: Rarely ever. Very, very illiquid.
Latest Investor Presentation: http://www.smrt.com.sg/investors/documents/presentations/DB_Conference_Investor_presentation_1QFY12.pdf
Website: http://www.smrt.com.sg/
Foreign Symbol: Singapore (S53.si)
Trades in Singapore: 771,161 (3mo avg vol as of 11/9/11)
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